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[G.R. No. 125355. March 30, 2000]
FACTS: Commonwealth Management and Services Corporation (COMASERCO, for brevity), is a
corporation duly organized and existing under the laws of the Philippines. It is an affiliate of Philippine
American Life Insurance Co. (Philamlife), organized by the letter to perform collection, consultative and
other technical services, including functioning as an internal auditor, of Philamlife and its other affiliates.
On January 24, 1992, the Bureau of Internal Revenue (BIR) issued an assessment to private respondent
COMASERCO for deficiency value-added tax (VAT) amounting to P351,851.01, for taxable year 1988.
COMASERCO stressed that it was not profit-motivated, thus not engaged in business. In fact, it did not
generate profit but suffered a net loss in taxable year 1988. COMASERCO averred that since it was not
engaged in business, it was not liable to pay VAT.
ISSUE: Whether COMASERCO was engaged in the sale of services, and thus liable to pay VAT thereon.
RULING: YES. Section 99 of the National Internal Revenue Code of 1986, as amended by Executive
Order (E.O.) No. 273 in 1988, provides that:
"Section 99. Persons liable. - Any person who, in the course of trade or business, sells, barters or
exchanges goods, renders services, or engages in similar transactions and any person who imports goods
shall be subject to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code."
Contrary to COMASERCO's contention the above provision clarifies that even a non-stock, non-profit,
organization or government entity, is liable to pay VAT on the sale of goods or services. VAT is a tax on
transactions, imposed at every stage of the distribution process on the sale, barter, exchange of goods or
property, and on the performance of services, even in the absence of profit attributable thereto. The term
"in the course of trade or business" requires the regular conduct or pursuit of a commercial or an
economic activity, regardless of whether or not the entity is profit-oriented.
The definition of the term "in the course of trade or business" incorporated in the present law applies to
all transactions even to those made prior to its enactment. Executive Order No. 273 stated that any person
who, in the course of trade or business, sells, barters or exchanges goods and services, was already liable
to pay VAT. The present law merely stresses that even a nonstock, nonprofit organization or government
entity is liable to pay VAT for the sale of goods and services.
At any rate, it is a rule that because taxes are the lifeblood of the nation, statutes that allow exemptions
are construed strictly against the grantee and liberally in favor of the government. Otherwise stated, any
exemption from the payment of a tax must be clearly stated in the language of the law; it cannot be
merely implied therefrom. In the case of VAT, Section 109, Republic Act 8424 clearly enumerates the
transactions exempted from VAT. The services rendered by COMASERCO do not fall within the


146984, 28 July 2006
FACTS: Pursuant to a government program of privatization, NDC decided to sell to private enterprise all
of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC). The NDC decided

to sell in one lot its NMC shares and five (5) of its ships, which are 3,700 DWT Tween-Decker,
Kloeckner type vessels. The vessels were constructed for the NDC between 1981 and 1984, then initially
leased to Luzon Stevedoring Company, also its wholly-owned subsidiary. Subsequently, the vessels were
transferred and leased, on a bareboat basis, to the NMC.
Public bidding was later on held. On 28 September 1988, the implementing Contract of Sale was
executed between NDC, on one hand, and Magsaysay Lines, Baliwag Navigation, and FIM Limited, on
the other. Paragraph 11.02 of the contract stipulated that [v]alue-added tax, if any, shall be for the account
of the PURCHASER. Per arrangement, an irrevocable confirmed Letter of Credit previously filed as
bidders bond was accepted by NDC as security for the payment of VAT, if any. By this time, a formal
request for a ruling on whether or not the sale of the vessels was subject to VAT had already been filed
with the Bureau of Internal Revenue (BIR) by the law firm of Sycip Salazar Hernandez & Gatmaitan,
presumably in behalf of private respondents. Thus, the parties agreed that should no favorable ruling be
received from the BIR, NDC was authorized to draw on the Letter of Credit upon written demand the
amount needed for the payment of the VAT on the stipulated due date, 20 December 1988.
ISSUE: Whether or not the sale of the vessels was in the ordinary course of trade or business of NDC and
therefore subject to VAT.
RULING: No. The transaction in question was not made in the course of trade or business of the seller,
NDC that is, the sale is not subject to VAT pursuant to Section 99 of the Tax Code, no matter how the said
sale may hew to those transactions deemed sale as defined under Section 100.
The term carrying on business does not mean the performance of a single disconnected act, but means
conducting, prosecuting and continuing business by performing progressively all the acts normally
incident thereof; while doing business conveys the idea of business being done, not from time to time, but
all the time. Course of business is what is usually done in the management of trade or business.
Course of business or doing business connotes regularity of activity. In the instant case, the sale was an
isolated transaction. The sale which was involuntary and made pursuant to the declared policy of
Government for privatization could no longer be repeated or carried on with regularity. It should be
emphasized that the normal VAT-registered activity of NDC is leasing personal property.

3. AT&T Comm. Service Philippines v. CIR, G.R. No. 182364, 3 August 2010
FACTS: AT&T Communications Services Philippines, Inc. (petitioner) is a domestic corporation
primarily engaged in the business of providing information, promotional, supportive and liaison services
to foreign corporations such as AT&T Communications Services International Inc., AT&T Solutions, Inc.,
AT&T Singapore, Pte. Ltd.,, AT&T Global Communications Services, Inc. and Acer, Inc., an enterprise
registered with the Philippine Economic Zone Authority (PEZA).
Under Service Agreements forged by petitioner with the above-named corporations, remuneration is paid
in U.S. Dollars and inwardly remitted in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP).
For the calendar year 2002, petitioner incurred input VAT when it generated and recorded zero-rated sales
in connection with its Service Agreements in the peso equivalent of P56,898,744.05. Petitioner also
incurred input VAT from purchases of capital goods and other taxable goods and services, and importation
of capital goods.

Despite the application of petitioners input VAT against its output VAT, an excess of unutilized input VAT
in the amount of P2,050,736.69 remained. As petitioners unutilized input VAT could not be directly and
exclusively attributed to either of its zero-rated sales or its domestic sales, an allocation of the input VAT
was made which resulted in the amount of P1,801,826.82 as petitioners claim attributable to its zero-rated
ISSUE: Whether or not the petitioner is entitled to a tax refund/credit.
RULING: YES. A taxpayer engaged in zero-rated transactions may apply for tax refund or issuance of
tax credit certificate for unutilized input VAT, subject to the following requirements: (1) the taxpayer is
engaged in sales which are zero-rated (i.e., export sales) or effectively zero-rated; (2) the taxpayer is VATregistered; (3) the claim must be filed within two years after the close of the taxable quarter when such
sales were made; (4) the creditable input tax due or paid must be attributable to such sales, except the
transitional input tax, to the extent that such input tax has not been applied against the output tax; and (5)
in case of zero-rated sales under Section 106 (A) (2) (a) (1) and (2), Section 106 (B) and Section 108 (B)
(1) and (2), the acceptable foreign currency exchange proceeds thereof have been duly accounted for in
accordance with BSP rules and regulations.
Zero-rated transactions generally refer to the export sale of goods and supply of services. The tax rate is
set at zero. When applied to the tax base, such rate obviously results in no tax chargeable against the
purchaser. The seller of such transactions charges no output tax but can claim a refund or a tax credit
certificate for the VAT previously charged by suppliers.
Applying the destination principle to the exportation of goods, automatic zero rating is primarily intended
to be enjoyed by the seller who is directly and legally liable for the VAT, making such seller
internationally competitive by allowing the refund or credit of input taxes that are attributable to export
Parenthetically, to determine the validity of petitioners claim as to unutilized input VAT, an invoice would
suffice provided the requirements under Sections 113 and 237 of the Tax Code are met.
Sales invoices are recognized commercial documents to facilitate trade or credit transactions. They are
proofs that a business transaction has been concluded, hence, should not be considered bereft of probative
value. Only the preponderance of evidence threshold as applied in ordinary civil cases is needed to
substantiate a claim for tax refund proper.
4. DIAZ v. SECRETARY OF FINANCE, G.R. No. 193007, 19 July 2011
FACTS: Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for
declaratory relief assailing the validity of the impending imposition of value-added tax (VAT) by the
Bureau of Internal Revenue (BIR) on the collections of tollway operators.
The government avers that the NIRC imposes VAT on all kinds of services of franchise grantees,
including tollway operations, except where the law provides otherwise; that the Court should seek the
meaning and intent of the law from the words used in the statute; and that the imposition of VAT on
tollway operations has been the subject as early as 2003 of several BIR rulings and circulars.
In their reply to the governments comment, petitioners point out that tollway operators cannot be regarded
as franchise grantees under the NIRC since they do not hold legislative franchises. Further, the BIR
intends to collect the VAT by rounding off the toll rate and putting any excess collection in an escrow
account. But this would be illegal since only the Congress can modify VAT rates and authorize its

disbursement. Finally, BIR Revenue Memorandum Circular 63-2010 (BIR RMC 63-2010), which directs
toll companies to record an accumulated input VAT of zero balance in their books as of August 16, 2010,
contravenes Section 111 of the NIRC which grants entities that first become liable to VAT a transitional
input tax credit of 2% on beginning inventory. For this reason, the VAT on toll fees cannot be
ISSUE: May toll fees collected by tollway operators be subject to VAT?
RULING: YES. VAT is imposed on all kinds of services and tollway operators who are engaged in
constructing, maintaining, and operating expressways are no different from lessors of property,
transportation contractors, etc.
Not only do they fall under the broad term under (1) but also come under those described as all other
franchise grantees which is not confined only to legislative franchise grantees since the law does not
distinguish. They are also not a franchise grantee under Section 119 which would have made them subject
to percentage tax and not VAT.
Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions. The toll
fee is not a users tax and thus it is permissible to impose a VAT on the said fee. The MIAA case does not
apply and the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do
not go the general coffers of the government. Toll fees are collected by private operators as
reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the
government as an attribute of its sovereignty. Even if the toll fees were treated as users tax, the VAT
cannot be deemed as a tax on tax since the VAT is imposed on the tollway operator and the fact that it
might pass-on the same to the tollway user, it will not make the latter directly liable for VAT since the
shifted VAT simply becomes part of the cost to use the tollways.
The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR
intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an
escrow account) is not enough to invalidate the law. Non-observance of the canon of administrative
feasibility will not render a tax imposition invalid except to the extent that specific constitutional or
statutory limitations are impaired.
[G. R. No. 141658. March 18, 2005]
FACTS: Respondents are domestic corporations licensed to transact insurance business in the country.
From August 1971 to September 1972, respondents paid the Bureau of Internal Revenue under protest the
3% tax imposed on lending investors by Section 195-A[4] of Commonwealth Act No. 466 (CA 466), as
amended by Republic Act No. 6110 (RA 6110) and other laws. CA 466 was the National Internal Revenue
Code (NIRC) applicable at the time.
Respondents paid the following amounts: P7,985.25 from Philippine American (PHILAM) Accident
Insurance Company; P7,047.80 from PHILAM Assurance Company; and P14,541.97 from PHILAM
General Insurance Company. These amounts represented 3% of each companys interest income from
mortgage and other loans. Respondents also paid the taxes required of insurance companies under CA

On 31 January 1973, respondents sent a letter-claim to petitioner seeking a refund of the taxes paid under
protest. When respondents did not receive a response, each respondent filed on 26 April 1973 a petition
for review with the CTA. These three petitions, which were later consolidated, argued that respondents
were not lending investors and as such were not subject to the 3% lending investors tax under Section
The CTA archived respondents case for several years while another case with a similar issue was pending
before the higher courts. When respondents case was reinstated, the CTA ruled that respondents were
entitled to their refund.
RULING: No. Insurance companies cannot be considered lending investors under CA 466, as amended.
The definition in Section 194(u) of CA 466 is not broad enough to include the business of insurance
companies. The Insurance Code of 1978 is very clear on what constitutes an insurance company. It
provides that an insurer or insurance company shall include all individuals, partnerships, associations or
corporations xxx engaged as principals in the insurance business, excepting mutual benefit associations.
More specifically, respondents fall under the category of insurance corporations as defined in Section 185
of the Insurance Code, thus:
SECTION 185. Corporations formed or organized to save any person or persons or other
corporations harmless from loss, damage, or liability arising from any unknown or future or
contingent event, or to indemnify or to compensate any person or persons or other corporations
for any such loss, damage, or liability, or to guarantee the performance of or compliance with
contractual obligations or the payment of debts of others shall be known as insurance
Plainly, insurance companies and lending investors are different enterprises in the eyes of the law.
Lending investors cannot, for a consideration, hold anyone harmless from loss, damage or liability, nor
provide compensation or indemnity for loss. The underwriting of risks is the prerogative of insurers, the
great majority of which are incorporated insurance companies like respondents.
The separate provisions on lending investors and insurance companies demonstrate an intention to treat
these businesses differently. If Congress intended insurance companies to be taxed as lending investors,
there would be no need for Section 182(A)(3)(gg). Section 182(A)(3)(dd) would have been sufficient.
That insurance companies were included with banks, finance and investment companies also supports the
CTAs conclusion that insurance companies had more in common with the latter enterprises than with
lending investors. As the CTA pointed out, banks also regularly lend money at interest, but are not taxable
as lending investors.
We find no merit in petitioners contention that Congress intended to subject respondents to two
percentage taxes and two fixed taxes. Petitioners argument goes against the doctrine of strict
interpretation of tax impositions.